Life Insurance: Our Choice as Married Without Kids

I like to think of myself as a personal finance nerd. I enjoy reading articles that explain different ways to budget, a new way to save, or how I should invest. I often read these articles and come to similar conclusions, not always, but many times the simplest way to do things is probably the best. Some personal finance topics you might hear argued both ways, like paying off your debt (mortgage, student loans, etc.) vs investing; this is always a fun one to read no matter what side you are on. There are others that really need a personal touch, as I like to say you need to put the “personal” in personal finance. One topic that lays a pretty broad blanket cast over is life insurance; this is one of the toughest topics to discuss in the Even Steven Money household, since Mrs. Even Steven considers this a topic of how we will die or jokingly mentions that if we get life insurance I now have a reason to plot her death…..I think she is kidding;)

Let’s take a look around the blogosphere and see what the typical advice for life insurance is. One of the more respected blogs over at Simple Dollar in their Complete Guide to Life Insurance write that most Americans need some sort of life insurance, they provide a few examples that would be exceptions to this rule, but this would be a pretty small few.

Courtesy of The Simple Dollar

A contrary approach from the Simple Dollar is none other than Mr. Money Mustache, those who read his blog are probably not very surprised at his thoughts on life insurance.

My wife and I have never carried life insurance on ourselves, and we consider it a compliment to each other: “I believe you would do Just Fine if I wasn’t around, because you’re a capable and independent person”.

What is your situation needs to be the first question you ask?

Well I am a married in our early 30’s; we have mortgage debt and a student loan soon to be gone from the picture. Both mortgages are covered with the rental income they provide, which plays an important role in our path for financial independence. We have no kids, only our crazy energy filled Siberian husky named Angel. We do rely in some ways on each other’s income and certainly our lives would change financially if income was not coming in from either one of us. However it would not cause us to lose our house(s), but it would probably cause us to slow down our financial independence journey, most likely with a sale of one of the houses, both of which have equity. In summary our financial situation would not be dramatically affected, things would no doubt change, but the changes would be minor in my opinion.

Do We Need Life Insurance?

Even after my brief analysis of our financial situation, I think it is in our best interest to have some sort of life insurance. It was something I thought on over the last couple of months, this will happen when you listen to Dave Ramsey every morning on your train ride to work.

So I decided to do some research and find out what would work best for our “Personal” Finance situation. What I came to discover that my work already covers 1x my annual salary in the case of my death and after asking Mrs. Even Steven to do some research at her company (we work in the same industry), found out they provide 2x her annual salary in the case of her death. Both of these policies are at no cost to us as they are provided as a benefit with our employment.

After talking it through and getting past the fact that I have no plans to plot any crazy murder schemes for life insurance, we decided we felt comfortable knowing in our financial situation and ages that having a small amount of life insurance would be more than enough to get us through that first year financially. Even Steven Money believes that our significant others are amazing people and have the strength and ability to move on financially with 1x-2x our annual salary. We understand the consequences if we move to a different job that life insurance could not be available to us, but based on our current financial projections we are getting ever closer to becoming financially independent and will rely on self-insurance of rental income, dividends, and any other passive income stream will provide.

Whatever financial decision you are making please make sure to understand your situation and what lines up best with your plan. While the Simple Dollar, Mr. Money Mustache, and Dave Ramsey our great financial resources please remember they do not know YOUR financial situation. Whether you are on this site to read my story and financial journey or you are here to compare your decisions with mine increasing your financial knowledge along the way make sure you are doing what is best for you by reading, comparing, and understanding your decision.

Having a mortgage and two young children, we both carry life insurance through our employers. We also pay a little extra to get another 1X on the life insurance over what the company will pay. We don’t have a long term, independent policy, since we assume as long as we are with the employer, we will not be FI. But, once we are FI, then we shouldn’t need life insurance.

The other reason we carry extra right now, is if something should happen to both of us, I want my brother (who will become the kids legal guardian) to have enough money to take care of the kids without having to worry.Mrs SSC recently posted…Decisions, decisions…

SSC having kids certainly changes the game and having family be involved that really is something to plan for. I’m with you on the employer life insurance, I certainly understand that we all move jobs, but if our FI date is within the next few years I agree I’m not sure the benefit of having an outside policy during that time.

I remember reading MMM’s observation on insurance in general and specifically about life insurance. He makes a good point. I am not financially independent like him but my job does pay 2 and half times my income and I’m a part of a union which provides an additional benefit so I feel secure. I did contemplate getting another term policy when my son was born but still haven’t done it. I’ve been debating it in my mind but don’t feel like it is needed, though the costs for term is not a big deal. Many also don’t realize that on top of life insurance, social security also provides a benefit.Andrew@LivingRichCheaply recently posted…Live For Today

I think having a kid to take care of if you pass away should be considered, Mrs. SSC mentions that she would have her brother take care of her kids and doesn’t want him overwhelmed financially besides taking care of your child.

I agree with you that carrying some sort of life insurance is a good financial move. Often times, we don’t know the actual impact of losing a partner. It might mean a person needs to take a year off to grieve or just unable to focus on work or earn income. Making sure there’s enough for the surviving loved one is important.Jason @ Phroogal recently posted…Your Money Mindset: Are You Unconsciously Spending on Likes Not Loves?

We purchased term life insurance about 2 years ago before my son was born. This is simply to provide a peace of mind. Once we become FI we shouldn’t need life insurance.Tawcan recently posted…Weekend Reading

I think the big X factor is not knowing how you or your spouse will react to the other dying prematurely. I worked in IT in the library during college and when one of the librarians husbands passed away it really changed her. It can be extremely difficult and – as bad as this sounds – “derail” a career. She was off and on for many months and they came to a mutually agreement (from my understanding) that she would no longer be employed at the University. I think it’s better to take out more money and not pretend like you know how you will react to your spouse dying prematurely – or what the full implications of that will be.DC @ Young Adult Money recently posted…Can You Be Too Addicted to Earning Money?

Similar point to Jason, we don’t know how the other will person will grieve, maybe it takes them 1 year or 5 years, but how would we know? I think error on the side of caution is one route, I could just as easily say if someone is grieving for 2 years, maybe they need that financial motivation to get their lives going. Thanks for sharing your personal experience it validates your point of view that I did not give a great amount of consideration when I wrote this.

I don’t have kids and I’m not married, but my fiance and I also don’t own any major assets (we rent). In the event of either of us passing away, I think we could take the MMM approach and say we’d be okay, financially-speaking. I’m on the same page as DC is, though. Emotions are a completely different beast. If you can’t pick yourself up after such a loss, your career could be at risk. You definitely need to have a plan B!Erin @ Journey to Saving recently posted…Being Grateful: Fifty-Fifth Edition

I think the only thing you can control is that financial aspect of the equation and make sure your comfort level is met for both parties. I think the fact that the discussion is being had is a great start.

This is great advice and actually I have a similar situation. My life insurance actually goes up the longer I am here and the more money I make. What i am after, as are a lot people, is self-insurance. I think that is a bit more than financial independence, but is not only enough money to pay the bills and live an ok life, but I am going to accumulate a little bit more to make sure that Mrs. ROB is taken care of if god forbid i am gone.

You are right Jason I think perfect situation we have enough cash flow above our expenses that self-insurance is our play and in the mean time having a small amount of cushion with our current employment gives us the comfort to achieve our goal in the mean time.

I think your take on life insurance makes sense. We never had extra life insurance outside of work. What we had through work has always been enough to cover our small mortgage. And since we always lived off of one salary while working, losing the other salary wouldn’t be the end of the world (not nearly as bad as losing the spouse, anyway!).

Soon after we got married, kids came along and we learned about the Social Security survivor’s benefit. It’s pretty generous and made any additional life insurance for us completely unnecessary when combined with our ever growing assets at the time.

For so many of those on the road to FI who are accumulating assets and don’t spend all their money, I don’t think they need a lot of life insurance. Maybe a small amount when young with little assets, but once you get 3-5x your annual spending saved up, you’re somewhat insulated from a loss of a partner.Justin @ Root of Good recently posted…Why We Chose The Worst School In The District

Great points Justin, I think I always thought that we would sell our home(s) within the next year upon a death and move closer to family for my wife in FL and I would probably stay here in Chicago and sell the FL property, since both have equity I would be on the fence with having a life insurance policy to cover this.

Not sure if you will be back to follow up but the SS survivor’s benefit wouldn’t be until age 62-66, was the thought process that you are covered until then and the spouse can live off any additional benefit from SS?

We both receive life insurance benefits through work. Mr. Maroon pays for a little extra for himself and the rest of us. My parents took out a whole life policy for me as a child. I don’t know why. We had a friend from college ask us if he could review our insurance needs with us. He was a wee bit over eager and told us we needed upwards of $1.5 million. We politely showed him the front door. Emotions aside, I think we could both manage money as necessary should the need arise.Mrs. Maroon recently posted…A Breeze-Fall

First read, I saw that you politely “shoved” him through the front door, haha! Interesting you mention the extra for himself portion, my company offered that for the first time this year and I thought it over and declined. Did the extra line up with what life insurance costs on the open market? Are you essentially buying a term policy for the year that you are working until benefit enrollment next year?

We have kids so we have quite a bit of life insurance. The good thing about buying it when you’re young is that it is so cheap! Our first policies that we bought when we were 25 are only in the $21 per month range- for 250K in coverage! I like knowing that my kids would be taken care of if something happened. The decision isn’t quite as simple when you don’t have any kids.Holly@ClubThrifty recently posted…In All Matters, You Have to Start Somewhere

The kids coming in to play is a major factor, I feel bad for anyone with children who does not have life insurance, I have heard a couple not so uplifting stories that would make me get life insurance if we would have kids.

Since we don’t have kids and our financial obligations could be met by one person (plus savings/rental property), we don’t have life insurance. But I wonder if maybe we should look into purchasing policies while we’re young and it’s more affordable. I can foresee it becoming necessary if we had kids and I’m not sure whether I’d be able to work if I lost my husband. Good food for thought.Jessica recently posted…30 By 30: First Quarter Review

I didn’t read all the comments, but there is something to be said to buying life insurance beyond just a “need.” For example, yes Mrs. ESM will be alright, but for the amount of a lunch or two she can have a multiple of your salary to get over the loss of what she thought was a partner for life.

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